A statutory defects liability period now applies to all building contracts where a retention or security may be held.
If a building contract doesn’t specify a period for release of retention or security, the contracting party must release retention amounts to contractors and subcontractors 12 months from the day of practical completion for the contract.
If a retention or security is held, the contracting party (head contractor or higher subcontractor) must give the subcontractor (or sub subcontractor) a Notice of End of Defect Liability Period within 10 business days before the end of the period.
This notice must include:
- the date the defects liability period ends;
- the amount of retention to be paid; and
- the date the retention amount will be paid.
If the defect liability period relates to the defect liability period for a higher contract, the subcontractor must also give the sub-subcontractor a S67NC Notice End Defect Period.pdf. If the subcontractor cannot give notice within 10 business days due to the time it receives its notice the subcontractor must give notice to its sub-subcontractors within 5 business days after receiving the notice.
Penalties may apply for failing to release a retention or security in accordance with the building contact.